Should I Start an LLC for My Farmers Market?

Starting a limited liability company (LLC) for your farmers market can provide several benefits.

Most importantly, an LLC structure offers limited liability to its owners, which can protect their personal assets from lawsuits and creditors.

For a farmers market, lawsuits can arise from things like a customer claiming that they got food poisoning after consuming produce purchased from your market.

LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your farmers market seem more credible.

Recommended: Use Northwest to form an LLC for $29 (plus state fees).

A variety of produce at a farmers market

Do I Need an LLC for a Farmers Market?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should start an LLC when there's any risk involved in your business and/or when your business could benefit from tax options and increased credibility.

LLC Benefits for a Farmers Market

By starting an LLC for your farmers market, you can:

Protect your savings, car, and house with limited liability protection
Have more tax benefits and options
Increase your business’s credibility

Limited Liability Protection

LLCs provide limited liability protection. This means your personal assets (e.g., car, house, bank account) are protected in the event your business is sued or if it defaults on a debt.

Farmers markets will benefit from liability protection because of the risk of being sued for libel, property damage, or personal injuries.

Example 1: A customer trips over a hole in the sidewalk and is badly injured. He files a lawsuit against you for negligence in maintaining your business premises. In cases like this, an LLC will protect your private assets if the court imposes a heavy fine on you.

Example 2: A customer has sued you for selling unwholesome farm produce, which caused him to suffer from food poisoning. Liability protection will shield you from paying for damages with your personal assets.

Example 3: You failed to maintain your commercial vehicle, which resulted in one of your employees having an accident. If you get a court order to compensate the victim for damages, liability protection will ensure you don"t pay through your private assets, irrespective of the amount.

Example 4: A farmers market from a neighboring town sues you, claiming that you libeled their business in a recent marketing campaign.

An LLC will also protect your personal assets in the event of commercial bankruptcy or loan default.

To maintain your LLC's limited liability protection, you must maintain your LLC's corporate veil.

LLC Tax Benefits and Options for a Farmers Market

LLCs, by default, are taxed as a pass-through entity, just like a sole proprietorship or partnership. This means that the business's net income passes through to the owner's individual tax return.

The business’s net income is then subject to income taxes (based on the owner's tax bracket) and self-employment taxes.

Sole proprietorships and partnerships are taxed in a similar way to LLCs, but they do not offer limited liability protection or other tax options.

S Corp Option for LLCs

An S corporation (S corp) is an IRS tax status that an LLC can elect. S corp status allows business owners to be treated as employees of the business (for tax purposes).

S corp tax status can reduce self-employment taxes and will allow business owners to contribute pre-tax dollars to 401k or health insurance premiums.

The S corp status requires that the business pay the employee-owner(s) a reasonable salary for the work they perform.

In addition, the business might need to spend more on accounting, bookkeeping, and payroll services. To offset these costs, you'd need to be saving about $2,000 a year on taxes.

We estimate that if a farmers market owner can pay themselves a reasonable salary and at least $10,000 in distributions each year, they could benefit from S corp status.

You can start an S corp when you form your LLC. Our How to Start an S Corp guide will lead you through the process.

Credibility and Consumer Trust

Farmers markets rely on consumer trust. Credibility plays a key role in creating and maintaining any business.

Businesses gain consumer trust simply by forming an LLC.

A growing business can also benefit from the credibility of an LLC when applying for small business loans, grants, and credit.

Northwest will start an LLC for you for just $29 (plus state fees).

Get Started

How to Form an LLC

Forming an LLC is easy. There are two options for forming your LLC:

You can hire a dependable LLC formation service to set up your LLC for a small fee
Or, you can choose your state from the list below to start an LLC yourself

Select Your State

For most new business owners, the best state to form an LLC in is the state where you live and where you plan to conduct your business.

Do LLCs Need Insurance?

All businesses need insurance to protect their business assets — even LLCs. This is because the limited liability protection from an LLC protects your personal assets, not your business assets.

Farmers markets need insurance to protect against potential risks associated with running and operating the market. Farmers markets are subject to multiple types of liability issues, such as property damage and personal injury lawsuits, which could lead to expensive legal fees in the case of a dispute.

Common Situations Business Insurance May Cover for a Farmers Market

Example 1: You leave your supplies on the ground as you take down your tent at the end of the day. As you run with a load of items to your car, a visitor trips over a tent pole and seriously hurts herself. She demands that you pay for her medical expenses, or she will sue. A general liability insurance policy would likely cover her medical bills.

Example 2: An employee is hauling large boxes of apples from their car to set up for the day. As he makes his final trip, he loses control of the pushcart, and it crashes into a crowd of visitors. The accident leaves several visitors with serious injuries. If they file a claim against your business, your general liability policy will likely cover your legal fees and any subsequent award settlements.

Example 3: After running a new advertising campaign on your local access station, you receive a call from a competitor accusing you of libel, and they threaten to sue you for damages. General liability insurance will help to pay your legal fees and cover any payouts if you settle out of court.

Other Types of Coverage Farmers Markets Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all farmers markets should obtain:

Commercial Auto Insurance

Transferring goods back and forth each week is a big part of your job. And to do so, you will probably rely on a number of different vehicles to get the job done. Any vehicles that are used for business purposes should be covered under a commercial auto insurance policy to financially protect your business and your employees in the event of an accident.

Workers’ Compensation Insurance

Workers’ compensation insurance is designed to help cover medical bills and disability benefits if an employee is injured or falls ill in a work-related accident. Most states require any business with part-time or full-time employees to carry this coverage.

Commercial Umbrella Insurance

There is always a chance that an accident or lawsuit can exhaust your primary insurance limits. If this happens, you could end up having to pay for the remaining damages out-of-pocket. To avoid this issue, commercial umbrella insurance works to go above and beyond your primary coverage and helps to keep your farmers market open for business.

Product Liability Insurance

Whenever you create or sell your products, keep in mind that there is a possibility that one of them could harm a customer. For example, a customer could claim that your product made them sick and sue you for damages. With product liability insurance, you can rest easy knowing that you have an extra layer of financial protection.

Should I Start an LLC FAQ

Choosing the right business structure depends on your business’s unique circumstances and needs. However, unless your business is very low risk (like a hobby), an LLC is likely the better option.

Visit our LLC vs. Sole Proprietorship guide to learn more.

At a minimum, you’ll need general liability insurance.

Read our Farmers Market Business Insurance article for more info.

The initial investment needed to set up an average farmer's market is between $25,000 and $30,000. The funding can be used for promotion, licensing, insurance, market equipment, supplies, and storage facilities. However, if you are already a farmer, the cost can be lower as you do not need to purchase supplies.

Visit our How to Start a Farmers Market guide to learn more about the costs of starting and maintaining this business.

Ongoing expenses are low for a farmers market and may include employee salaries, permit renewals, and marketing.

Learn more about running a farmers market.

A farmers market makes a profit by charging vendors a fee for a booth at the market.

Learn more about starting a farmers market.

Farmers markets are places where local farmers and other food merchants can sell their products. A farmers market’s profits depend on the number of vendors and customers it has.

Learn more about starting a farmers market.